Post on 02-Jun-2018
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Dr. Kartik Dave
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AGENDA
Introduction to Marketing
Customer Analysis
Segmentation of Customers
Competitor Analysis
Market Analysis Marketing Environment Analysis
#
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AGENDA
Company Analysis
Selection of Market Segment andCompetitive Strategy
Developing Value Proposition,Positioning, and Business Design
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WHAT IS MARKETING?
If a business firm is willing and ableto satisfy the need of these group of
people/firms, they can be called thebusiness firmspotential customers.What is marketingthen?Marketing is acquisition, retention,
and enhancement of business fromthese customers at a profit to thebusiness.
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WHAT IS BUSINESS?
What is business?
A business is a collection of activities to
provide some products/services to itspotential customers.
Some of these activities can be termed
primary activities and few other supporting
activities.
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THE INTEGRATED BUSINESS VIEW
Inbound
Logistics
Operations Outbound
Logistics
Marketin
g
& Sales
Service
Firm Infrastructure
Human Resource Management
Technology Development
Procurement
Support
Activities
Primary Activities
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HIERARCHY OF HUMAN NEEDS
Self-Actualization
Needs
(self-development
and realization)
Esteem Needs(self-esteem, recognition, status)
Social Needs
(sense of belonging, love)
Safety Needs(security, protection)
Physiological Needs
(hunger, thirst)
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How a company can consistentlydeliver
superior value to customers and at the
same time make money for the
shareholders?
This is possible only when the company
has developed certain capabilities to
integrate the different business activitiesinto processesthat provide such value to
the customers at a cost which is less
than the cost of these activities.
MARKETING AND BUSINESS
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What are these processes?
The first is the innovation process, which
analyses potential market opportunities,researches for solutions, and develop
acceptable value propositions for the target
group of customers.
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MARKETING AND BUSINESS
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MARKETING AND BUSINESS
Second, the business needs an efficient
operations process - it has to produce and
deliver products that meets the world-class
standards of cost and performance.
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MARKETING AND BUSINESS
Finally, it must have an effective process forcustomer creation, customer support, andcustomer retention.
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MARKETING MYOPIA Production orientation to Product
orientation to Sales orientation. What is the problem with these
orientations?It resulted in business firms definingtheir business in terms ofproducts/services they produce andsell.
It led to marketing myopia whichprevented business firms to understandwhat customers really need andwhether this need can be met by any
othersubstitute products.Dr. Kartik Dave13
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MARKETING MYOPIA
American railroads, defined their
business too narrowly (railroad
business instead of transportationbusiness).
As a result their business declined
inevitably as they could not foresee
that the transportation needs of thecustomers could be met by other means
of transport as technology advanced.
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MARKETING MYOPIA
Petroleum industry still thinks itself as
producer of petroleum and petroleum
products instead of thinking itself as
being in the energy business.
It must come out of the narrow grip of its
tight product orientation and instead
think itself as taking care of customersenergy needs. Otherwise the oil firms
will be companies without an industry.
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ESCAPING MARKETING
MYOPIA
How do a business get out of this kind of
marketingmyopia?
Business firm must think of itself not asproducing products but as providing
customer value.
This is possible when a business firm is truly
customeroriented.
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PRODUCTS AS
SOLUTIONS/BENEFITS
George Eastman, founder of Kodak:
Kodaksells memories
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PRODUCTS AS
SOLUTIONS/BENEFITS
Charles Revson of Revlon:
In the factory we make cosmetics;
in the store we sell hope.
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Customer (Market) Orientation
For marketing to become the central
purpose of business, everybody in everyfunction must put the customer at thecentre of the business; that is marketingmust be the guiding philosophy of theorganization.
The organizational culture and climatemust effectively encourage the followingbehaviours:
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EVOLUTION OF BUSINESS FIRMS
ORIENTATION TO CUSTOMERS
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MARKET ORIENTATION
Customer Orientation
Competitor
Orientation
Inter-functional
Coordination
Target Market
Long-termprofit
focus
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Market-driving companies generate
significantly new products, services,
business formats and raise our sights
and our civilization.
These companies are much more than
customer-led. They lead customers
where they want to go, but dontknowyet.
Sonysinnovation culture.
MARKETING AND INNOVATION
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Social Marketing
The organizations task is to determine
the needs, wants, and interests of target
markets and to deliver the desired
satisfactions in a way that preservesor
enhances the consumers and thesocietyswell-being.
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EVOLUTION OF BUSINESS FIRMS
ORIENTATION TO CUSTOMERS
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Copyright 2009 Dorling Kindersley(India) Pvt. Ltd.
Holistic Marketing Dimensions
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CUSTOMER
ANALYSIS
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Consumer Behavior
The behavior that consumers display in searching
for, purchasing, using, evaluating, and disposing of
products and services that they expect will satisfy
their needs.
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Consumer behavior provides the behavioral fit
to marketing mix which need to be changed from
time to time by marketers.
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Consumer Behavior Is Interdisciplinary
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Psychology
Sociology
Socialpsychology
Anthropology
Economics
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BUYERS CHARACTERISTICS
CulturalSocial Personal
Psychological
Buyer
Culture
Subculture
Social class
Reference
groups
Family
Roles andstructures
Age and
life-cyclestage
OccupationEconomicCircum-
stances
Lifestyle
Personality/self-concept
Motivation
Perception
Beliefs andattitudes
Learning
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Verbal model of culture and value dimensions of
Indian Consumers
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The new Emerging Lifestyles of UrbanConsumers
Labelled, Urban, Chilled, Kicked-with-life Indians or the
LUCKIES Marked by multiple credit cards, off centre job options,
recycling initiatives, a generation much aware aboutalternatives and sporting a choicy selection. (These arereferred to as Global Nomads by Radhika Chopra-
DSE) Confident communicators and can flourish in a global,
competitive market.
Living in style is the in-thing.
Believes in looking good. Ravaged by labels.
Working hard by day and clubbing all night.
T.V has played a major role.
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a new breed of consumer in India
young, increasingly wealthy and
willing to spend on everything from
mobile phones to I-Pods to French
fries.
Time magazine
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Median age of 26.2
0
10
20
30
40
50
2005 2010 2025
India US
Source: US Bureau of the Census, International Data Base, 2002
age
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Consumerism on rise
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% spends
Source: KSA TechnopakShare of Wallet
0
1
2
3
4
5
6
7
8
9
Ea
ting
Out
Boo
ks
&
Mus
ic
Mov
ies
&
Thea
tre
Compu
ters,
Lap
tops,
Mo
bile
Phone
20-25 yrs
26-50 yrs
Persona
l
Care
Items
Sav
ings
&
Inves
tments
En
terta
inment
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A Hedonistic Society
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Information Babies
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A rural consumer is looking forfunctional value, not frills.High involvement in the purchase ofany product.The decision making is a collectiveprocess governed by social values.
They are more brand loyalthan theirurban counterparts.Word-of-mouthrecommendations byusers influences purchase decisions.
UNDERSTANDING THE RURALMINDSET
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The family is the most importantconsumer-buying organization in thesociety.
Family members
constitute the
most influentialprimary reference
group.
Social Characteristics..
THE FAMILY AND ITS ROLE INPURCHASING DECISIONS
http://images.google.co.in/imgres?imgurl=http://www.phac-aspc.gc.ca/canada/regions/atlantic/Publications/Inclusion_lens/image_title.jpg&imgrefurl=http://www.phac-aspc.gc.ca/canada/regions/atlantic/Publications/Inclusion_lens/inclusion_e.html&h=512&w=450&sz=77&hl=en&start=4&tbnid=Q_DDL4LwHQUeKM:&tbnh=131&tbnw=115&prev=/images%3Fq%3Dreference%2Bgroup%26gbv%3D2%26hl%3Denhttp://images.google.co.in/imgres?imgurl=http://z.about.com/d/animatedtv/1/7/c/K/FamilyGuyParty.jpg&imgrefurl=http://animatedtv.about.com/od/fgmultimedia/ig/-Family-Guy--Pictures---Charac/FamilyGuyParty.htm&h=500&w=341&sz=98&hl=en&start=4&tbnid=hkyJu2UGv4nUeM:&tbnh=130&tbnw=89&prev=/images%3Fq%3Dfamily%26gbv%3D2%26hl%3Den8/10/2019 FIEO welcome ppt
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THE TRANSITION OF NUF
THEN NOW
Father
Mother
Children
Spousal Role
Parental Role
Strict, Unemotional,Authoritarian
Caring, Concerned,Sensitive
Emotional, Caring,
Nurturing
Informed, Independent,
Enterprising
Self-indulgent,Irresponsible,
Rebellious
Responsible,Disciplined,
Career-Minded
Strictly Hierarchical,Rigid
Egalitarian, Flexible
Controlling, DistantDemocratic,
Companionable
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Personal Characteristics.
A FAMILY LIFE CYCLE MODEL
Bachelor
Newlymarried
Nochildren
Full NestISmall
Children
Full NestII
Grown updependent
children
Empty NestI
Children notliving
at home
Empty Nest
IIRetired
Children notliving
at home
Typical age range
0 - 25 25 -50 50 +
Single: Always Single; Divorced: Widowed
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PSYCHOLOGICAL FACTORS
A persons buying choices are influenced by
four major psychological factors:
Motivation Perception
Learning
Beliefs and attitudes
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PERCEPTION, LEARNING,
BELIEFS AND ATTITUDES How a motivated person actually acts is
influenced by his or her perceptionof the
situation, learning, beliefsand attitudes.
Perception is the process by which an
individual selects, organizes, and
interprets information inputs.
Learning involve changes in anindividuals behaviour arising from
experience.
Classical Conditioning
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Classical Conditioning
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PERCEPTION, LEARNING,
BELIEFS AND ATTITUDESA belief is a descriptive thoughtthat a person holds about
something.An attitude is a persons enduringfavourable or unfavourable
evaluations, emotional feelings,and action tendencies towardsome object or idea.
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MODERN MARKETING MODEL
Product
Money
Equity
(trust)
Experience(relationship)
Energy(convenience)
Rational Emotional
Value
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THE BUYER EXPERIENCE CYCLE
Supplements Maintenance Disposal
Do you needother productsand services to
make thisproduct work?
If so how costlyare they?
Does the productrequire externalmaintenance?
How easy is it to
maintain andupgrade theproduct?
Does use of theproduct createwaste items?
How easy is it
to dispose ofthe product?
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Marketing not only requires a focus on
satisfying customer needs it also has a
competitive dimension.The firm must seek a value proposition
that satisfies the needs of target
customers more effectively thancompetitors.
WHY COMPETITOR ANALYSIS?
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From the perspective of the customer:
Focus on customer choice. A buyer of a particular brandcould be asked what brand would have been purchased
if that brand was out of stock or what are the otherbrands he had considered for purchase.
IDENTIFYING COMPETITORS
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Association of products with specific use contexts orapplications. A number of respondents could be asked tolist out the different use situations for a particularproduct under study. Then these respondents could be
asked to name all the products that are appropriate foreach of these use contexts.
IDENTIFYING COMPETITORS
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A strategic group is a group of firms that: Over time pursue similar competitive strategies
(e.g., product differentiation, use of samedistribution channel).
Have similar characteristics (e.g., size,aggressiveness).
Have similar assets and skills(e.g., strong brand,excellent service quality image).
IDENTIFYING COMPETITORS
STRATEGIC GROUPS
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COMPETITIVE STRENGTH GRID
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COMPETITIVE STRENGTH GRID
Assets and Skills
Key for Success
New product capacityProduct quality
Cost structure
Product differentiation
Dealer satisfaction
Market share
Second ary Imp or tance
Flexible production
Financial capacity
Quality of managementSales force/distribution
Brand name recognition
Advertising/promotion
Quality of service
Growth of target segment
Company A Company B Company C
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DIMENSIONS OF A MARKET
ANALYSIS
The nature and content of an analysis of amarket will often include the followingdimensions: Actual and potential market size Market growth
Market profitability
Cost structure
Distribution systems Trends and developments
Key success factors
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MARKET SIZE AND GROWTH
What are important and potentially
important sub-markets?
What are their size and growthcharacteristics?
What are the driving forces behind
sales trends?
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MARKET SIZE AND GROWTH
The potential market includes the usage
gap, which can be penetrated by creating
increased frequency of use, new users,
and new uses. To forecast growth patterns, it can be
helpful to consider the forces driving
sales, leading indicators, corresponding
industries, pressure on prices, and theexistence of substitute products.
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MARKET PROFITABILITY
Is this a business area where an average
firm will make a profit?
How intense is the competition among
existing firms?
Evaluate the threats from potential
entrants and substitute products.
What is the bargaining power of suppliersand customers?
How attractive/profitable are the market
and the sub-markets?
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MARKET PROFITABILITY
Michael Porter, Harvard economist and
business strategist, has brilliantly
exposed the market profitability dynamicsthrough his five forces model.
According to Professor Michael Porter of
Harvard Business School, the state of
competition in an industry is a composite
of five competitive forces.
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These forces are:
The rivalryamong competing firmsin the industry.
The attempts of firms in other
industries to win customers over
to their own substitute products.
FORCES DRIVING MARKET
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The potential entry of new
competitors.
The bargaining power andleverage exercisable by suppliers
of inputs.
The bargaining power and
leverage exercisable by buyersof
the product.
FORCES DRIVING MARKET
FIVE FORCES DRIVING COMPETITION
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FIVE FORCES DRIVING COMPETITION
Potential
Entrants
Industry
Competitors
Rivalry Among
Existing Firms
Suppliers Buyers
Substitutes
Threat of
Substitute
Product
or Services
Bargaining Power
of Suppliers
Bargaining Power
of Buyers
Threat of
New Entrants
Entry Barriers Economics of Scale
Product Differentiation
Capital Requirement Switching Costs
Access to Distribution Channels
Cost Disadvantages
Government Policy
Rivalry Determinants: No of Competitors
Industry Growth
Fixed Cost Switching Cost
Exit Barriers
Determinants of Supplier
Power: Supplier Concentration
Substitute Inputs
Differentiation of Inputs
Switching Costs Of Suppliers Importance of the Input
Threat of Forward
Integration
Determinants of Buyer Power: Buyer Concentration
Buyer Volume
Buyer Switching Cost
Substitute Products Buyer Information
Ability to Backward Integration
Determinants Of Substitution Threat
Relative price performance of
substitutes
Switching costs
Buyer propensity to substitute
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OTHER COMPONENTS OF A
MARKET ANALYSISCost Structure
What are the major costs for the various
types of competitors?
Distribution SystemsWhat are the alternative channels of
distribution?
Key Success Factors
What are the key success factors, assets,
and skills needed to compete
successfully?
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Distribution Systems
Access to effective and efficient distribution channel
is often a KSF.
Emergence of e-commerce
Convenience stores at petrol pumps and gas
stations Catalogue retailing
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Market Trends
What is change and what is important?
Missing or misinterpreting a trend can be disastrous.
Trends drives growth and rewards those who develop
differentiated strategies, fads are short term investment
attracters.
Identify trend or fad:
What is driving it
How accessible is it
Is it broadly based
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Strategic Implications for Marketing
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Country Population(millions)
GDPper
capita
Carsper 1000
TVsper 1000
PCsper 1000
Canada 33.4 35,700 581 655 460
China 1,321.9 7,800 8 306 19India 1,129.8 3,800 8 58 6
Kenya 36.9 1,200 13 22 6
Mexico 108 10,700 151 241 69
Strategic Implications for Marketing
THE COMPANYS MARKETING
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ENVIRONMENT
COMPANY
Suppliers
The Economy
Technology
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COMPETITIVENESS OF INDIA
Country GCIRank
2004-05
GCIRank
2005-06
GCIRank
2006-07
GCIRank
2007-08
GCIRank
2010-11
India 55 50 42 48 51
China 46 49 35 34 27
Brazil 57 65 66 72 58
Japan 9 12 5 8 6
USA 2 2 1 1 4
Source: Global Competitiveness Report 2010-11
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Cocooning
Fantasy adventure
Pleasure Revenge
Small Indulgences Down Aging
Being Alive
99 lives
SOCIO-CULTURAL MEGA
TRENDS
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WHY TECHNOLOGICAL
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ENVIRONMENT IS
IMPORTANT?
Technology is a dynamic force which
shapes peoples and industries' lives and
even wipe out entire industries.
We live in an age in which the pace of
technological change is pulsating ever
faster, causing waves that spread outwardtoward all people, and all industries.
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8/14/201273
Videotapes + VCR + TelevisionVCD or DVD + PC or Television.
OREntertainment Cable + PC or Television
Analog Camera Digital Camera
Stand Alone Digital Camera DC, PC
Stand Alone Digital Camera Mobile Phone+ Digital Camera
WHY TECHNOLOGICAL
ENVIRONMENT IS IMPORTANT?
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What are the implications of this shift todigital camera?
First, traditional camera industry nolonger exists in many of the developedcountries. It has become a peripheral tothe PC, or one of the input/output devicesto a PC.
Second, because of the shift to the digitalcameras, the entire value chain for theanalog camera industry is in trouble.
WHY TECHNOLOGICAL
ENVIRONMENT IS IMPORTANT?
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WHY POLITICAL-LEGAL
ENVIRONMENT IS IMPORTANT?
This environment is composed oflaws, government agencies, and
pressure groups that influence andlimit various organizations andindividuals.
Sometimes these laws create newopportunities for business.
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INDIAN LEGAL ENVIRONMENT
Competition Law replacing
Monopolies And Restricted Trade
Practices Act
Food and Drugs Act
The Food Safety and Standards Act,
2006
Consumer Protection ActIntellectual Property Rights Act
Environment Protection Act
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MAJOR FORCES DRIVING
BUSINESS
The competitive wellbeing of business
is determined by six major forces.
The power, vigour, and competence of acompanys existing competitors,
suppliers, customers, potential
competitors, complementors, and the
possibility of substitution.
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What such a transition does to a businessis profound, and how the businessmanages this transition determines its
future. We are, in fact, witnessing a major
transitionin the way business is done as aresult of some major business trends.
These are: E-Business
Consolidation
Globalization.
MAJOR FORCES DRIVING
BUSINESS
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GLOBALIZATION
There have been three great eras ofglobalization.
Globalization 1.0 This lasted from 1492 when Columbus set sail,
opening the trade between the old world and thenewuntil around 1800.
The force driving the process of globalintegration was the physical prowess of a few
countriesof West Europe .
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Globalization 2.0 Lasted roughly from 1800 to 2000.
The force driving the process of global
integration was multinational companiesfrom theWest.
In the first half of this era, global integration waspowered by falling transportation costs, and in thesecond half by falling telecommunication cost.
GLOBALIZATION
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Globalization 3.0 Started around the year 2000.
The dynamic force is the newfound power for
individuals to collaborate and compete globally.Individuals from every corner of the world is beingempowered.
Companies, large and small have also been newlyempowered.
GLOBALIZATION
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FORMAT FOR COMPANY ANALYSIS
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1.Performance IndicatorsMarket Share
Sales GrowthNet Profit Margin
ROI
Others
2.Internal StrengthsInternal Weaknesses
External Opportunities
External Threats
3.Competitive Strength Assessment
Key Success Factor
4.Competitive Position
5.Major Strategic Issues
Year 1 Year 2 Year 3 Year 4 Year 5
Firm A Firm B Firm C Firm D Firm E
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F l l f Mi k i
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Four levels of Micromarketing
Segments
Local areas Individuals
Niches
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Copyright 2009 Dorling Kindersley (India) Pvt. Ltd. 8-88
What is Customerization?
Customerizationcombines operationallydriven mass customization with customized
marketing in a way that empowers
consumers to design the product and service
offering of their choice.
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Market segmentation is the process of
dividing a varied and differing groups of
customers or potential customers into smallergroups,who want the same value (benefits or
solutions to problems) from the product or
service.
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WHAT IS MARKET
SEGMENTATION?
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CLASSIFICATION OF
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CLASSIFICATION OF
SEGMENTATION BASES
General Product-specific
Observable
Un-observable
Geographic,
demographic and
socio-economic
variables
User status, usage
frequency, loyalty
and patronage,
situations
Psychographics(life-style),
values, personality
Benefits, perceptions,preferences,
intentions
SOCIO-ECONOMIC
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CLASSIFICATIONS IN INDIAEducation
Occupation
Unskilled
Skilled Workers
Petty Traders
Shop Owners
Businessmanwith employees
None
1-9
10+
IlliteRate
School4 yrs
School5-9 yrs
SSC/HSC
CollegeEdu
Grad/Post
(Gen)
Grad/Post
(Prof)
1 2 3 4 5 6 7
01
02
03
04
05
06
07
E2 E2 E1 D D D D
E1 D C C B2 B2
E2 D
D
D
D C
C CD B2 B2
B2
B2
B2 B2
C
C
B1
B1
B1 B1
A2 A2
A2 A2
A2
A2 A2
B1
A1
A1
A1 A1 A1
A1
E2
SOCIO-ECONOMIC
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Education
Occupation
IlliteRate
School4 yrs
School5-9 yrs
SSC/HSC
CollegeEdu
Grad/Post
(Gen)
Grad/Post
(Prof)
Self-employedProfessionals
Clerical/
Salesman
Supervisory
Executives
Junior
Middle/Senior
1 2 3 4 5 6 7
08
09
10
11
12
D D D
DD D
D D
C
CC
C C C
B2
B2
B2
B2
B1 B1 B1 B1
B1
B1
B1
B1
B1
A2
A2
A2
A2
A2
A1 A1
A1
CLASSIFICATIONS IN INDIA
PSYCHOGRAPHIC
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In psychographic segmentation, buyers are
divided into different groups on the basis of
lifestyleor personality or values.
People within the same demographic group
can exhibit very different psychographic
profiles.
Dr. Kartik Dave94
PSYCHOGRAPHIC
SEGMENTATION
Th VALS S t ti S t
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The VALS Segmentation System
Sric-bi.com
BENEFIT/VALUE BASED
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BENEFIT/VALUE BASED
SEGMENTATION
On its own this approach to segmentation,
while able to provide you with an
invaluable insight into how to win a
customer's business, still requires you toknow how to reach them.
The input to this part of the equation,
provided by a detailed understanding ofwho the customersare and where they are
to be found, is clearly very important.
ALTERNATIVE CLASSIFICATION
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It is, therefore, worthwhile to look at
an alternative way to classify the
segmentation variables so that wecan find out
What benefits/value the customers
want? Who are theyand where are they?
ALTERNATIVE CLASSIFICATION
OF SEGMENTATION BASES
ALTERNATIVE CLASSIFICATION
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ALTERNATIVE CLASSIFICATION
OF SEGMENTATION BASESIdentifier Variables(Who they are)
Consumer Markets
Geographic Location
Demographics Socio-economic Factors
Psychographics
Business Markets
Company Size Industry
Geographic Location
Response Variables(What they want)
Benefits Desired
Price, reliability, service
Applications/Usage Situation User Status, usage frequency,
application of the product
Sensitivity to Marketing Mix
Product features, price,
promotion
Purchasing Behaviour
Buying volume
Switching among brands
Purchasing approach
Channels used
SEGMENTATION OF BUSINESSCUSTOMERS
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Organizational demographics:
Industry / Company s ize/ Loc at ion
Operating variables:
Techno logy /User status /Customer
capabil i t ies (f inancial)
Purchasing approaches
Organizat ion of DMU/Purchasin gpol ic ies/Purch asing cr i ter ia
Situational factors
Urgency /Appl icat ions /Order size
Personal characteristics:Motiv ation/Buyer-sel ler dyad/
Risk percept ions
General, observable
(Macro)
Specific, subtle
(Micro)
(Intermediate)
CUSTOMERS
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FACTORS FOR SELECTING
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Key Success Factors (KSF)Product Quality
Brand ReputationTechnology RequirementCost StructureDistribution System
Quality of ServiceFinancial Capacity
FACTORS FOR SELECTING
MARKET SEGMENTS
FACTORS FOR SELECTING
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Company ObjectivesCompatibility with company goalsRelationships with other segments
ProfitabilityResources and Capabilities of theCompany and Competitors
Ability to conceive and design
R & D CapabilityExisting Patents and CopyrightsAccess to new technologies throughthird parties
FACTORS FOR SELECTING
MARKET SEGMENTS
FACTORS FOR SELECTING
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Resources and Capabilities of theCompany and Competitors
Ability to Produce (Quality & Quantity)
Production TechnologyProduction CapacityFlexibility in ProductionCost Competitiveness
Ability to MarketBrand ReputationDistribution StrengthService Strength
FACTORS FOR SELECTING
MARKET SEGMENTS
FACTORS FOR SELECTING
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Resources and Capabilities of theCompany and Competitors
Ability to Finance
Access to Capital from OperationsAbility to Use Debt & Equity FinanceParentsWillingness to Finance
Ability to Manage/Execute
Quality of ManagementQuality of Decision MakingInnovativenessOrganization Culture
FACTORS FOR SELECTING
MARKET SEGMENTS
SELECTING MARKET SEGMENTS
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Selection of market segment to servehas to be on the basis of the fit between:
the attractiveness of the segment,
the key success factors for operating inthe segment, andthe companys relative ability tocompete in the segment.
The company also needs to consider thecompetitive reactions it might face if itdecides to compete for a segment.
SELECTING MARKET SEGMENTS
TO SERVE
THREE GENERIC
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COMPETITIVE STRATEGIES
1 Cost
Leadership
2 Differentiation
3A Cost
Focus
3B Differentiation
Focus
Lower Cost Differentiation
Broad
Target
Narrow
Target
Competitive
Scope
Competitive Advantage
WHAT IS COST LEADERSHIP
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WHAT IS COST LEADERSHIP
STRATEGY?
In a cost leadership strategy, a firm
sets out to become a low-cost
producer in its industry.
The sources of cost advantage may
include the pursuit of economies of
scale, proprietary technology,
preferential access to raw materials,locational advantage and other
factors.
WHAT IS COST LEADERSHIP
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A cost leader must achieve parity or
proximity in the bases of
differentiation relative to itscompetitors to be an above-average
performer, even though it relies on
cost leadership for its competitiveadvantage.
WHAT IS COST LEADERSHIP
STRATEGY?
WHAT IS COST LEADERSHIP
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Proximity in differentiation means
that the price discount necessary to
achieve an acceptable market sharedoes not offset a cost leader cost
advantage and hence a cost leader
earns above average returns.
WHAT IS COST LEADERSHIP
STRATEGY?
WHAT IS DIFFERENTIATION
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WHAT IS DIFFERENTIATION
STRATEGY?
In a differentiation strategy, a firm seeks to
be unique in its industry along some
dimensions/attributes that are widely
valued by buyers. It is rewarded for itsuniqueness with a premium price.
A firm pursuing differentiation strategy
must always seek ways of differentiating
that lead to price premium greater than the
cost of differentiating.
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WHAT IS FOCUS STRATEGY?
The focuser selects a segment or a group
of segments in the industry and tailor its
strategy to serving them in a better way
than its competitors though it does notpossess an overall competitive advantage.
In a cost focus a firm seeks a cost
advantage in the target segment.
In a differentiation focus, a firm seeks
differentiation in its target segment.
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AL RIES ON FOCUS
Thesun is a powerful source of energy. ..
Yet with a hat and some sunscreen you
can bathe in the light of the sun for hours
at a time with a few ill effects.A laser is a weak source of energy. .. But
with a laser you can drill a hole in a
diamond or wipe out a cancer.
When you focus a company, you create
the same effect. You create a powerful,
laser like ability to dominate a market.
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All businesses is a niche business. The
question is what kind of niche do you
want to own?
Sacrifice is the essence of corporatestrategy. Without sacrifice there is no
strategy. Without sacrifice a company
becomes weak.When you sacrifice yourenot giving up
anything at all; what you are doing is
defining your position.
AL RIES ON FOCUS
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